Parliamentary Superannuation Age Factors (Division 293 Tax Law) Determination 2015 (No. 1)

Overview

The Parliamentary Superannuation Age Factors (Division 293 Tax Law) Determination 2015 (No. 1) was introduced to address the changes to the Division 293 tax that impact concessional superannuation contributions for high-income earners, including parliamentarians. This Determination was made under the authority of subsection 22SE(4) of the Parliamentary Contributory Superannuation Act 1948 (PCS Act), which governs the superannuation scheme for parliamentarians who entered Parliament before 9 October 2004. The objective of the Determination is to provide a framework for calculating the reduction in superannuation pensions of retiring parliamentarians to offset their Division 293 tax liabilities. This was necessitated by the 2013 amendment to the PCS Act, which introduced the option for retiring parliamentarians to have a lump sum taken from their superannuation entitlements to cover their tax liability, thereby reducing their pension. The determination of these age factors by the Secretary of the Department of Finance ensures the accurate application of the tax changes to superannuation benefits within the PCSS.

Scope and Application

The Parliamentary Superannuation Age Factors (Division 293 Tax Law) Determination 2015 (No. 1) applies to parliamentarians who were members of the Parliamentary Contributory Superannuation Scheme (PCSS) and who entered Parliament prior to 9 October 2004. The Determination is made under the authority of the Parliamentary Contributory Superannuation Act 1948 (PCS Act) and serves to calculate the reduction in a retiring parliamentarian's PCSS pension when a lump sum is taken from their superannuation entitlements to offset their Division 293 tax liability. The Determination outlines the specific age factors used in these calculations, which were determined by the Secretary of the Department of Finance. The Determination is a legislative instrument that is exempt from disallowance due to its relation to superannuation, and it came into effect on the day after it was registered on the Federal Register of Legislative Instruments. While the Determination itself does not extend or restrict application through subordinate instruments, the PCS Act allows for the making of regulations that may further define or modify the application of the PCSS.

Key Provisions

The Parliamentary Superannuation Age Factors (Division 293 Tax Law) Determination 2015 (No. 1) (sections 1-4) sets out the age factors that determine the reduction in pension entitlements for retiring parliamentarians who opt to use their lump sum to pay Division 293 tax liabilities. The PCS Act allows these parliamentarians to reduce their superannuation pensions by the amount of the tax, calculated using the factors provided in the Determination. The age factors vary depending on the parliamentarian's age at retirement, with younger retirees facing a larger reduction in their pension (section 3). The Determination imposes specific obligations on the Secretary of the Department of Finance, who must determine the age factors to be applied to the pension reductions. The Secretary must also ensure that these factors are communicated to relevant parties, such as the Australian Taxation Office and the Department of Human Services, to facilitate the correct calculation and payment of superannuation pensions and taxes (section 2). Additionally, the Determination mandates that actuarial advice be obtained to validate the factors, ensuring they accurately reflect the financial implications of the Division 293 tax changes on the PCSS (section 1). Breaches of the provisions in the Determination are not explicitly detailed in the explanatory statement, but it is implied that non-compliance could result in incorrect calculations of superannuation pensions and taxes, leading to potential financial discrepancies for the retirees and administrative issues for the government departments involved. While the explanatory statement does not specify civil or criminal penalties, any significant errors or omissions could potentially lead to investigations or corrective actions by the relevant authorities to rectify the inaccuracies. The Determination is exempt from disallowance under the Legislative Instruments Act 2003, meaning it does not require a Statement of Compatibility with Human Rights, as it is not subject to disallowance (subsection 44(2) of the LIA). This exemption arises because the Determination relates to superannuation, as outlined in item 39 of the table in subsection 44(2) of the LIA. The Determination comes into effect on the day after it is registered on the Federal Register of Legislative Instruments.